KLEIN: But eventually, Republicans are going to have to agree to something.

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: I will not vote to increase the debt ceiling.

UNIDENTIFIED MALE: It‘s insanity, is what it is.

OBAMA: I will reconvene congressional leaders here on Sunday.

PELOSI: Meeting again on Sunday.

UNIDENTIFIED MALE: They‘re going to come back here Sunday.

HAYES: And Sunday is also the end of Rupert Murdoch‘s best-selling paper.

ROBERT THOMAS, MSNBC ANCHOR: Final issue, Sunday.

KLEIN: James Murdoch today announced the end for the British tabloid, “News of the World.”

UNIDENTIFIED MALE: Closing on Sunday after 168 years.

UNIDENTIFIED FEMALE: All of the things that people have talked about, this is an evil empire.

ROBERTS: Phone hacking scandal.

UNIDENTIFIED MALE: This is disgusting, disgraceful.

UNIDENTIFIED FEMALE: They are closing the paper in name. They are expanding the publication of “The Sun” tabloid.

UNIDENTIFIED FEMALE: Just how low will a tabloid go?

ROBERTS: British tabloid “News of the World” announced it will publish its final issue Sunday.

UNIDENTIFIED FEMALE: Don‘t you mean the rebranding of “News of the World”?

(END VIDEOTAPE)

HAYES: Good evening from Los Angeles.

Today, with the clock ticking down in a crisis with serious economic ramifications looming, President Obama called congressional leaders up to the White House to try and walk Republicans back from the ledge. After the meeting, the president went to the press room to provide some insight into the chance of a looming crisis actually happening.

(BEGIN VIDEO CLIP)

OBAMA: We just had a productive meeting. We discussed the impasse that we‘re currently at, with respect to the budget, and I thought the meetings were frank, they were constructive, and what they did was narrow the issues, and clarify the issues, that are still outstanding. I remain confident that if we‘re serious about getting something done, we should be able to complete a deal and get it passed and avert a shutdown.

(END VIDEO CLIP)

HAYES: No, wait. That‘s actually the wrong tape. That‘s what the president said during the last 11th hour showdown in April, but it sounds pretty much like what he said today.

(BEGIN VIDEO CLIP)

OBAMA: I just completed a meeting with all the congressional leaders from both chambers, from both parties. And I have to say that I thought it was a very constructive meeting. People were frank. We discussed the various options available to us. Everybody reconfirmed the importance of completing our work and raising the debt limit ceiling so that the full faith and credit of the United States of America is not impaired.

(END VIDEO CLIP)

HAYES: This is the new normal, of course. Welcome to the Boehner era.

Republicans have decided they won‘t negotiate without one hand on the detonator. Let‘s remember because it cannot be said enough—what‘s happening right now is not what we think of traditionally as negotiating, a little of this, a little of that, nobody gets everything but everybody gets something.

What the Republicans are demanding is that the Democratic president and the Democratic-led Senate adopt the Grover Norquist position on taxes, which is no net tax revenue increase whatsoever, at all, full stop.

This is an extreme right-wing position far beyond the bounds of normal American politics over the last several decades and it is now not only the dominating principle of the conservative movement, and the Republican Congress, but if a deal is made on these terms, the official governing principle of the Democratic president of the United States.

And don‘t be fooled because some Republicans are maybe, sort of kind of sounding like they are open to ending some tax breaks or subsidies, but they are still asking for an equal tax break somewhere else offsetting, thus the impact on the bottom line number would be zero, which means to get to x trillion would require more cuts.

Keep in mind, tax revenue as a percentage of GDP is at a 60-year low. Just look at what‘s happened over the past 20 years. Tax revenues went up steadily in the 1990s and dropped sharply in the last decade.

Speaking to the media after the meeting, House Democratic Leader Nancy Pelosi seemed like she couldn‘t quite believe it‘s come to this.

(BEGIN VIDEO CLIP)

PELOSI: Does he call it a grand bargain? However the president represents it, I want him to have the room to do that, and offer full cooperation to do that. I also want to have full clarity about where House Democrats stand. We do not support cuts and benefits for Social Security and Medicare.

Let me say this one further comment. The debate on a budget is a traditionally controversial measure. It is a different value system that we bring to the table, different priorities. And so, it is of its nature partisan.

Whether we—it should not be partisan as to whether we will honor the full faith and credit of the United States government. So, it‘s unfortunate that these two issues have come together in this way.

(END VIDEO CLIP)

HAYES: Joining me now is Maryland Congressman Steny Hoyer, the House Democratic whip.

Congressman Hoyer, reports indicate that the Democratic Caucus was taken aback by the reports that the president is now seeking a $4 trillion deal and that Medicaid and Social Security are on the table. Were you and your colleagues caught off-guard?

REP. STENY HOYER (D), MARYLAND: Well, I don‘t know if we were caught off-guard. I think the caucus is clearly concerned about: (a), getting the debt limit so that we don‘t default on America‘s bills and we stabilize the economy and continue to grow the economy. And we are also very focused on making sure that Medicare beneficiaries and Social Security beneficiaries are not adversely affected.

We want to see, however, the deficit brought down and the debt addressed. But I don‘t think that—I think they want to have assurances that Social Security recipients and Medicare recipients will be unharmed by any effort that we make. But I think they understand that we‘ve got to work all focus on the fact that in a very short period of time, America is not going to be able to pay its bills, and that will have a very bad consequence on everybody‘s pension funds, on homeowners interest rates, on consumer interest rates. It will not be something that will be beneficial to our country, and very damaging to our economy.

So, we‘re very focused on that, and we‘re going to work towards that end. As you know, we met with the president today, and we‘re going to meet again on Sunday.

HAYES: Congressman, let me ask you. You just said that you want assurances that recipients of Social Security and Medicare will be unharmed. I wonder, what do you—what does unharmed mean to you? What is the point after which you cannot abide?

HOYER: Well, look, I don‘t want to go into every possible eventuality that might occur, but I think it‘s clear what unharmed means. Unharmed—not adversely affected.

HAYES: Adversely affected, though, could mean a change in the computation of the cost of living increases in Social Security, that could amount for, say, $1,000 less in real terms per year.

Does that—does that count as not adversely affected?

HOYER: Well, you know, when I say unharmed, that would, I think, be an adverse effect, yes. And Social Security recipients now we think should not be adversely affected. So that‘s—I think that‘s our position. It‘s a strong position. I think the president wants to make sure that doesn‘t happen as well.

HAYES: Let me ask you what kind of leverage your caucus has. Obviously, you‘re in the minority in the House. It looks like this deal is largely being negotiated—the principals are Speaker John Boehner and the president of the United States. What kind of leverage do you feel you have, and how many votes do you think that speaker can deliver to get this passed when ultimately a deal—if a deal is crafted and is put forward?

HOYER: You know, I don‘t know the answer to that question, Chris, how many votes the speaker has or can have. And I don‘t think he‘ll know, and we won‘t know, until, in fact, some sort of agreement is reached. And while the president has been talking to the speaker, he‘s also been talking to us as well.

And as I say, we were all at a meeting today. We‘re going to be back there on Sunday, trying to work towards assuring that we have a long-term plan that brings the debt down, gets the deficit down, and make sure that we have a country that pays its bills.

I think those are the objectives. I think they‘re pretty clear. I think everybody‘s going to have to come to the table and realize that they are going to have to be compromises made. We understand.

In fact, we know that there are going to be cuts that necessary in discretionary spending and defense spending. We‘re going to look at entitlements, obviously.

But the fact of the matter is that I think we ought to all be focused on making sure that America does not default on its bills, because if we do, we will adversely help—hurt an already struggling economy. We will hurt individual consumers. We‘ll hurt every pensioner who has any money in the stock market. We‘re going to hurt the financial community.

So, that that is generally agreed I think by everybody in the room today as not an alternative that‘s acceptable.

HAYES: But if it‘s not acceptable, why do you have to negotiate? I mean, if everyone in the room agrees that you can‘t do that, right, then you should be able to just pass the debt ceiling? I mean, this has been I think what has flummoxed people, obviously, who are not inside the room. This is what flummoxed people from the beginning.

HOYER: Let me make a point. I made it clear and I believe that the Democrats would vote overwhelmingly to make sure that America doesn‘t default on its bills, if that proposition were before us. And, in fact, a majority of Democrats have already voted on that proposition, even on a bill that the Republicans put on the floor clearly designed to fail, and every single one of them voted no. Notwithstanding the fact that they know we need to meet our obligations and not default on our bills.

So, I said today again that Democrats would clearly be ready to support such a piece of legislation.

Now, having said that, we want to see what—if that‘s not put on the floor, we want to see what package is contemplated to be on the floor, and that‘s what we‘re talking about at the White House. Clearly, there are some things that if, first of all, we‘re not going to balance the budget or bring the deficit down on the backs of the most vulnerable in America.

HAYES: Let me ask you about that question, because what‘s currently being—and this is—I know you have to go out there, so I‘m going to wrap this up. But what‘s currently being reported is a ratio of essentially 85 percent on the spending side, 15 percent on the revenue side.

I wonder, do you think that‘s fair? And if not, what is your conception of what a fair package would look like in terms of the balance between the two?

HOYER: Look, I believe that the Bowles-Simpson commission gave an excellent report. That doesn‘t mean I agree with everything they had in there, nor did they expect everybody to agree to it. But they had about a 2 ½-to-1 spending cuts to revenues ratio. They believed in a bipartisan fashion, and that was a reasonable ratio.

Fifteen to 85 is not a reasonable ratio because what it means is that the wealthiest people in America are getting a big tax break, and the most vulnerable people in America are being asked to pay the bill. That‘s not an American value. It‘s not the values that we share. And it‘s not a program that we would support.

HAYES: Want to know one more thing that shows what a strange new era we‘re living in? Remember this prescient observation on election night?

(BEGIN VIDEO CLIP)

LAWRENCE O‘DONNELL, HOST, THE LAST WORD: Our debt ceiling is now $14.3 trillion. It will need to be raised in the coming year.

(END VIDEO CLIP)

HAYES: Back then, most everyone was wondering what the hell the debt ceiling was.

We‘re happy to report tonight that the debt ceiling has reached a new pop culture height. It‘s now cool enough or nerdy enough to be parodied by photo shop cats. Someone seriously awesome has started tracking the debt ceiling news on the debt ceiling cat tumbler, featuring a cat in a ceiling. (INAUDIBLE) has full and credit.

Much more on this coming up, including warnings from progressives to President Obama when it comes to cutting Medicare and Social Security. Congressman Keith Ellison and former DNC chair, Howard Dean, join me tonight.

And later, the scandal that has forced Rupert Murdoch‘s company to kill one of its best-known tabloid newspapers. We‘ll look at why they are quitting rather than fighting after a phone hacking scandal that has all of England buzzing.

(COMMERCIAL BREAK)

HAYES: What President Obama called a very constructive meeting on the budget has some on the left using words like “harmful.” How far would and should the administration go to get a deal? Representative Keith Ellison and former Governor Howard Dean join me with their reaction.

And later, Republican presidential candidate Tim Pawlenty wants to talk about serious business on the campaign trail, like his love of Lady Gaga. Although polling indicates he is not in fact on the edge of glory. This ought to be good.

(COMMERCIAL BREAK)

HAYES: Today, Republican Senator Orrin Hatch voted against a nonbinding measure that simply said millionaires and billionaires should play a more meaningful role in reducing the nation‘s debt, after he argued that the nation‘s wealthy are already overburdened. He said it‘s time for the poor and the middle class to step up to the plate, that they‘ve been cuddled too long by Democrats.

(BEGIN VIDEO CLIP)

SEN. ORRIN HATCH ®, UTAH: I hear how they are still caring for the poor and so forth. The poor need jobs. And they also need to share some of the responsibility.

(END VIDEO CLIP)

HAYES: Yes. That‘s what we‘re dealing with here. Millionaire senators who think the poor and middle class have it too easy in this country. That‘s why Social Security, Medicaid, and the rest of the social safety net are being offered up for sacrifice while the wealthy are protected from calls to reduce the deficit.

Even though seven times as many Americans rank jobs and the economy as the most important problem fate facing the country over the deficit, 53 percent to 7 percent.

Joining me now is Congressman Keith Ellison, a co-chair of the Progressive Caucus. Congressman, do you ever look around and think that you are in some sort of crazy bizarro world? Because to me, the conversation in Washington is so detached from the immediate pressing need for jobs, I don‘t even know where to begin sometimes when I‘m doing these interviews.

REP. KEITH ELLISON (D), MINNESOTA: Well, you know, that‘s why we had to break out of the beltway and go out to America. The Progressive Caucus is on a 12-city jobs tour. And so, we‘ve gone across the country. We‘ve gone to Milwaukee, Detroit, Minneapolis, and we‘ve gone to New York City. We‘re going to Miami, because we need to hear from the real folks.

One lady in Minneapolis stood up and said she‘s a Walmart employee.

She‘s a manager. She makes $9.80 an hour, no benefits.

She says she carries three cards in her pocket. One is her Walmart ID, the second her discount card, and the third is a welfare card—a card so that she can partake of the basic social safety net that Walmart refuses to grant to her, even though she is a manager and even though she is a valued employee by them. You wouldn‘t know it by the pay they give her.

So we‘ve gotten outside of the Beltway and we‘re going to keep doing it because, you know, when I heard Orrin Hatch‘s statement today, I was—

I was quite frankly flabbergasted and amazed at how out of touch he must be.

I mean, when is the last time this guy bagged a grocery or walked through a grocery store or sat in a barbershop? I mean, doesn‘t he know that people are really suffering out there? They are in foreclosure. Doesn‘t he know these things? I mean, everybody else seems to know.

HAYES: Congressman, let me ask you about the social safety net. Obviously, House Minority Leader Pelosi said that the caucus would not support cuts to Medicare, Social Security. It seems to me—

ELLISON: Add Medicaid to that. Add Medicaid to that.

HAYES: OK. That‘s actually interesting, because that‘s going to be where I was going. When you start to think about those three programs, it seems to me like Medicaid is the most politically vulnerable.

ELLISON: Right.

HAYES: How are you going to make sure that‘s not where the cuts end up going?

ELLISON: By always telling people that Medicaid is a part of this three—this set of three that we‘re going to protect: Social Security, Medicare, and Medicaid. Medicaid—it‘s important to remember—goes to help the health care needs of the poorest Americans. It helps people stay in nursing homes. It helps people who are most vulnerable adults who have no health care, sometimes children‘s programs.

It is a vitally important program for the poorest Americans. And without it, they have nothing—nothing at all.

And so, I—are these the people who senator hatch thinks need to buck up and do more? Are these the people he thinks are not doing their fair share?

HAYES: Finally, since it‘s going to come down to a squeaker, I think, in the House, if and when there‘s a deal that‘s struck, it seems if you do the math, the Progressive Caucus is going to have genuine leverage here. And the reason is that they are going to need Democratic votes to get this passed.

Will you pledge that you and your colleagues at will not vote for a package that includes cuts to Medicare, Social Security, and/or Medicaid?

ELLISON: Yes. Full stop.

HAYES: Great. Excellent. Well, we got that on record.

Congressman Keith Ellison, thanks so much for joining us tonight.

ELLISON: Yes, sir. Take care. Thank you.

HAYES: The White House attempts to drive both parties towards the mythic beast all of Washington loves and seeks, a grand bargain. Former governor and DNC chairman, Howard Dean, is here to talk about it.

And later, is Tim Pawlenty hipper than we thought? Or is he just trying to get in good with the kids? Wait until you hear Pawlenty‘s pearls of wisdom about Lady Gaga.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Everybody acknowledged that there‘s going to be pain involved politically on all sides, but our biggest obligation is to make sure we‘re doing the right thing by the American people.

(END VIDEO CLIP)

HAYES: That was the president today following budget negotiations today. His message to both parties: to expect political pain.

After the president‘s statement, Press Secretary Carney provided some detail on where that pain might come from.

(BEGIN VIDEO CLIP)

CARNEY: Savings has to come—will have to come from discretionary spending, cuts in programs, in some cases, the Democrats and the president will see is painful but necessary; cuts in defense spending that are significant, but protect our national security; cuts in entitlement spending, savings that we can extract to reduce health care costs without putting the onus on seniors or the disabled; and cuts in tax spending.

(END VIDEO CLIP)

HAYES: I should note here that the real pain is going to be felt by the people who receive the programs, and not just the Democratic politicians who want to protect them. But of that list, the most politically painful measure for Republicans is what Press Secretary Carney creatively referred to as cuts in tax spending. Apparently, the White House thinks if you cut the words “cuts” and “spending” in it, Republicans might go for it.

Joining me now: former governor of Vermont and current CNBC contributor, Howard Dean.

Thank you for joining us, Governor.

HOWARD DEAN, CNBC CONTRIBUTOR: Chris, this is a fascinating time, isn‘t it?

HAYES: It sure is. Let‘s get into this. The president is apparently seeking $4 trillion in cuts over the next decade. And, you know, everything—to invoke the cliche—is on the table, Social Security, Medicare, Medicaid.

I wonder, are there ways to get to that number that—and avoid genuine immiseration for the poor and middle class?

DEAN: Yes, there are, actually. I‘m actually pleased with what the president is doing. Who knows if I‘ll be pleased at the end of the line?

But this is the grand bargain that needs to be done. And he‘s persisting in trying to do this and saying I think properly no to the - oh, let‘s just extend this for three weeks. There‘s nothing while we work it all out.

So, here‘s the—if you look at what—look, Boehner, I have a lot of respect for Boehner. He is not the radical right-wing crack pot section of his party. He is going to have to pass this without the 87 votes or whatever it is that the Tea Party has put in there, but he‘s going to have to take some heat for it.

But here‘s the compromise and if you listen carefully to what they‘re saying, these are the outlines of a possible compromise. First of all, you do not have to cut benefits for Social Security, Medicare, Medicaid. You do have to pay for them differently. And I‘ve long believed that one of the shortcomings of the health care bill that capitated payment, that reform of payment systems for the whole health care system, not just Medicare and Medicaid need to be done.

If you do that, you‘re going to get huge savings without cutting benefits.

Secondly, I thought Carney was right on the money. OK. I disagree with the Republicans on taxes. It‘s foolish to have billionaires get—average millionaire gets $138,000 tax break right now. It‘s ridiculous.

But this is a compromise. The compromise is: reduce what he

creatively called tax spending. Tax spending is the $53 billion the oil

companies get from taxpayers. And there‘s tons of other things like that -

ethanol subsidies and all of these things. There‘s a long list of special interest tax breaks over the years.

You throw all those in, and with the Defense Department, you can get to where we need to go.

HAYES: Can we zoom in for a second on Medicare? Then I want to get to Medicaid. This is your area of expertise. So what it sounds like is, as opposed to benefit cuts, right, they are talking about reducing the payments to the providers, specifically hospitals, if I understand.

DEAN: You don‘t have to do that. That will—probably what‘s what they are talking about. And it‘s not the right where to go. It‘s why I don‘t think this thing that the Republicans hate, this PIAD, is all that big a deal. If they want to take it out, go ahead.

The only way you can ever control health care costs in this country is to get rid of the perverse incentive that we have to do as much as you possibly can. If you regulate specific payments, people are just going to figure out how to get around the payments by providing more service.

You have to pay for health care the way Kaiser pays for health care. Give them a set amount, and tell them this is what you get. Here are the benefits you have to provide for this. Let them figure out how to do it.

HAYES: MIT just conducted a landmark study, the effects of Medicaid, which is health care for the poor largely, attract 90,000 Medicaid eligible people in Oregon, only 10,000 of which actually receive Medicaid insurance due to the state‘s lottery system.

And the study found that enrolling in Medicaid significantly improves the overall health and financial stability of low income Americans. The program also reduces the number of unpaid bills to health care providers. And yet Medicaid seems to have nowhere—obviously to command nowhere near the political power of either Medicare or Social Security.

Do you worry about Medicaid ending up—

DEAN: I do. We use Medicaid not just for poor people. We use Medicaid as the basis of our universal health care for kids under 18, which we‘ve had for 20 years in Vermont, as a result of an expansion of Medicaid.

Medicaid is a terrific program. It does have its faults. Its biggest fault is under-reimbursement. But it‘s a big program. And I would agree anecdotally with the—that in my experience the MIT study is exactly right.

The problem with Medicaid is that it doesn‘t have much of a constituency, because not many politicians care about poor people. The Republicans clearly don‘t care about them at all. Obviously, Orrin Hatch thinks they‘re the enemy. I don‘t know who thinks he is going to serve his next McDonald‘s hamburger or take care of him at Wal-Mart the next time he goes shopping, sends his staff to go shopping for him.

And even the Democrats don‘t have a very high regard, in some cases. I think Keith certainly does. But the progressive caucus does. But there‘s a lot of Democrats who—you know, who care more about some of the fat cats that contribute from Wall Street than they do about poor people. They talk about poor people in a nicer way, but they don‘t have a big constituency.

And Medicaid is a very important system. But, as MIT pointed out, this is important for middle class people and it‘s important for health care providers. Hospitals can‘t survive without a Medicaid program. Otherwise,, they will have to deliver that same care for nothing.

HAYES: We‘re going to keep our eye on the Medicaid ball as this develops. Former Governor Howard Dean, thanks so much for your expertise tonight. I really appreciate it. .

DEAN: My pleasure. Thanks for having me on.

HAYES: Coming up, why is Rupert Murdoch, the most powerful media mogul on Earth, trying to get away from reporters? Even a Fox News crew had to chase after him. Because the scandal he‘s facing just brought an entire newspaper down and could send some of his top lieutenants to jail.

(COMMERCIAL BREAK)

HAYES: Presidential candidates are, first and foremost, human beings. This essential fact becomes difficult to keep in mind as the campaign wears on and they robotically offer the same talking points.

But for own basic capacity for empathy, I think it‘s probably a good thing not to dehumanize political opponents. So I bring you this piece of tape from the campaign trail, which I found kind of delightful.

(BEGIN VIDEO CLIP)

TIM PAWLENTY ®, PRESIDENTIAL CANDIDATE: Are you ready?

UNIDENTIFIED FEMALE: Ready.

PAWLENTY: What‘s your favorite Lady Gaga song?

UNIDENTIFIED FEMALE: That‘s easy.

UNIDENTIFIED FEMALE: “Glory.”

UNIDENTIFIED FEMALE: “Paparazzi.”

UNIDENTIFIED FEMALE: Oh, yeah.

(END VIDEO CLIP)

HAYES: Yes, that‘s Tim Pawlenty, ex-governor of Minnesota, and current candidate for the Republican nomination. Glitterazi, a Washington-based pop culture blog, snagged the interview with the presidential candidate on the road in Iowa. When asked about his favorite musician of all time, he said Bruce Springsteen, which is predictable, given that he is right in the Boss‘ demographic wheelhouse.

But then Mr. Pawlenty exhibited a genuinely impressive knowledge of pop‘s most delightfully bizarre icon.

(BEGIN VIDEO CLIP)

PAWLENTY: How about “Born This Way,” the new one? You like that? I have to say, even though she is a little unusual, “Born This Way” has some appeal.

She is actually very talented. If you go to the end of the HBO special—the Lady Gaga HBO special, and you watch her sing a cappella “Born This Way,” she can sing. She can definitely sing.

(END VIDEO CLIP)

HAYES: It isn‘t the first time he has played the Lady Gaga card. Back in April, at a young Republicans event in Iowa, he said the relationship between the youth vote and Barack Obama would be the song “Bad Romance.” Groan.

But it‘s the choice of “Born this Way” that caught our attention. Back in 1993, Pawlenty supported Minnesota‘s first in the nation ban on discrimination based on sexual orientation and gender identification. His vote ensured people couldn‘t be fired or be denied housing for having been born this way.

Alas, candidate Pawlenty now says he regrets that vote, because it covered transgendered folks. He thinks that‘s just a preference for dress and behavior.

He also now supports a constitutional amendment to define marriage as only between a man and a woman. And he wants to reinstate—reinstate Don‘t Ask Don‘t Tell. He says his views have evolved over time.

Devolved Lady Gaga might say. Maybe she would just say this—

(BEGIN VIDEO CLIP)

(SINGING)

(END VIDEO CLIP)

HAYES: Coming up, when Glenn Beck was forced off Fox News, it was merely the end of one TV show on a 24-hour cable network. That‘s nothing compared to what is happening to one of Rupert Murdoch‘s other big media properties. It‘s going out of business and some of its managers could wind up in handcuffs.

Has team Murdoch gone too far?

(COMMERCIAL BRAEK)

HAYES: After 168 years, the Rupert Murdoch empire announced today that the phone-hacking, scandal-grabbing international headlines would be the undoing of British tabloid giant “the News of the World.”

Today, Murdoch‘s son, James, told his staff that this Sunday‘s edition of the paper would be its last ever. The paper is accused of paying off police, while hacking into the phones of celebrities, members of the royal family, a murdered teenager, victims of terrorism, and war widows, for years.

The scandal started back in 2005, when aides to the British Royal Family suspected the paper of eavesdropping on private conversations. In 2006, British police arrested one of the paper‘s reporters and a private investigator on conspiracy charges. “News of the World” vowed an investigation, but also contended this was the work of just a few bad apples.

In 2007, Andy Coulson, then editor of the paper, resigned in fallout from the scandal, and was then hired by British Prime Minister David Cameron as his director of communications.

Then, in the last few days, detailed emerged that the “News of the World” hacking wasn‘t a few isolated incidents and wasn‘t simply limited to celebrities and the royal family. The paper had hacked into the phone of Millie Dowler, a murdered 13-year-old British teenager, as well as the victims of terror attacks, and the families of fallen British soldiers.

British police now say they have uncovered nearly 4,000 hacking victims -- 4,000. And even after making the unprecedented call to stop the presses forever, the Murdoch family is protecting Rebecka Brooks, Rupert Murdoch‘s protege, who was once editor of “News of the World,” and now heads the Murdoch company that owns the tabloid, all while the Murdoch family throws the paper‘s journalists under the bus.

(BEGIN VIDEO CLIP)

JAMES MURDOCH, CEO, NEWS CORP EUROPE AND ASIA: I am satisfied that Rebecka, her leadership of this business, and her standard of ethics, and her standard of conduct, throughout her career, are very good.

Fundamentally, actions taken a number of years ago by certain individuals,

in what had been a good newsroom, have breached the trust that the “News of

the World” has with its readers

And we took the decision to close down the paper, to cease publication after this Sunday, really because of that.

(END VIDEO CLIP)

HAYES: Rupert Murdoch himself was in no real mood to chat today. The octogenarian walking quite briskly to get away from reporters, including one of his own from Fox Business. As for those “News of the World” employees who have been thrown under the proverbial bus, we do know what some of them did after work today.

A few hours ago, the paper‘s film critic, Robbie Collin, Tweeted “we are all getting drunk.”

Back with us again tonight, Archie Bland, the foreign editor of “The Independent Newspaper” in London. Archie, we‘re getting reports in “the New York Times” and in your own paper that the journalists of the “News of the World” who are suddenly out of a job feel like they are being sacrificed all to protect Rebecka Brooks, who is of course Murdoch‘s protege, and was the one overseeing “News of the World” at the time most of this was going on.

ARCHIE BLAND, “THE INDEPENDENT NEWSPAPER”: And they‘re completely right to feel that. Most of the reporters there now weren‘t there at the time. The paper has actually kind of cleaned house since those terrible days. That isn‘t really the practice that goes on there anymore.

The only really senior person who is still at News International, who is associated in a major way with all of that, in a way that anyone can really detect, is Rebecka Brooks. And she is the only person, as far as anyone can see, who is going to get away with this whole thing Scott free.

Instead of one person being got rid of in a way that could have drawn a line under this, probably could have helped everyone to move on and think about something else, it appears that the Murdoch family has decided to protect this person at the expense of 200 journalists, all of whom are probably going to lose their jobs. It‘s an extraordinary story.

HAYES: It‘s also remarkable, reports today indicating that Andy Coulson—again, trying to keep the names straight for the listeners who are sort of jumping into this. Coulson, of course, he was an editor before Brooks. And then David Cameron hired him, even after he had been disgraced in the scandal, that he is set to be arrested tomorrow.

Is that what you‘re hearing?

BLAND: Yeah, that‘s right. He was actually the editor after Brooks. But on any other day, this would be the big story, that the former—or sorry, director of communications to the prime minister, basically the British C.J. from “The West Wing,” is going to be arrested.

Right, right, right. It‘s an unbelievable story there. And it looks as if he‘s going to be arrested. It‘s possible, although it‘s still only alleged, that he could actually face perjury charges. And he could very easily end up doing prison time over this.

HAYES: There‘s been some speculation I read today about the motivation behind shutting down “News of the World.” One of the columns I read today said that they thought it was possible that this would be a way of essentially the Murdoch empire destroying the evidence, that once they shut it down, they would not have to retain records of any sort.

Do you know if there are any police present in the building, or if there are any legal injunctions that have been offered to make sure that the evidence of how broadly this practice was being pursued doesn‘t vanish?

BLAND: Well, I have actually seen the same piece you‘re talking about. I have also seen a bit of skepticism over whether or not that would be possible under British law. I‘m not enough of an expert to tell you.

But certainly there have been police present in the newsroom before now. There aren‘t right now. But what has become clear over the years is that News International, in the past, has done quite a lot to try to cover up the evidence of all of this, that it went, for instance, to India to try to persuade a company which ran its service there to delete stuff, which the company refused to do.

More recently, News International has actually been much more forthcoming, and has decided that the only way to try and get through this thing is to get it all out there. So I would hope that now that most of the evidence will ultimately come out.

Whether any evidence will come out definitively linking Rebecka Brooks to something which either she must have known about or she was utterly incompetent at her job, that‘s another question that‘s very hard to answer.

HAYES: Archie Bland of “The Independent,” my guest for the second night in a row, walking us through the ongoing scandal in London. Thanks so much. Really appreciate it.

BLAND: No problem.

HAYES: What does this mean for the man who has always stayed one step ahead when controversy swirled around his newsrooms? The crisis that is shaking Rupert Murdoch‘s empire to its core is coming up.

UNIDENTIFIED MALE: Have you shaped that agenda at all, in terms of perception of the war, in terms of how the war is viewed?

MURDOCH: No, I didn‘t think so. I mean, we tried.

(END VIDEO CLIP)

HAYES: There you have it, Rupert Murdoch, in his own words, on how business is done at News Corp. So it really should come as no surprise that controversy surrounds the media giant on a regular basis.

Damage control is a near constant in Murdoch‘s various media holdings. after a litany of indecency fines, liable lawsuits and claims of anti-business practices. Remember when Glenn Beck said this about President Obama?

(BEGIN VIDEO CLIP)

GLENN BECK, FORMER FOX NEWS ANCHOR: This president I think has exposed himself as a guy, over and over and over again, who has a deep-seeded hatred for white people or the white culture. I don‘t know what it is. This guy is, I believe, a racist.

(END VIDEO CLIP)

HAYES: This—that clip still drives me crazy every time I see it. After those 2009 comments, advertisers boycotted Beck‘s program. Murdoch seemed unaffected and even went onto TV defending Beck‘s comments.

(BEGIN VIDEO CLIP)

MURDOCH: I think it was something which perhaps shouldn‘t have been said about the president. But if you actually assess what he was talking about, he was right.

Of course, that was in reference to uncovered lawsuit documents that said publishing powerhouse Judith Regan was encouraged to lie to federal investigators who vetting Bernard Kerik for the job of Homeland Security secretary.

Nothing ever came of the claims, but News Corporation did pay Regan 10.7 million dollars in a wrongful termination suit, settlement in 2007.

So what of this latest scandal involving phone hacking at “News of the World” paper? Is this a scandal that could take Murdoch under?

Joining me now, Elyse Hogue, senior adviser to Media Matters for America. Elyse, great to have you on.

ELYSE HOGUE, SR. ADVISER, MEDIA MATTERS: Great to be here, Chris.

Thanks.

HAYES: Elyse, you wrote a piece on TheNation.com today about why Americans should care about the scandal. And it‘s a really good question, because I think batting around this in production meetings, there is a question of does this affect us here, or is it kind of train wreck that‘s fun to gawk at? Why should we care?

HOGUE: We should care because Murdoch enjoys undue influence over U.S. media. And one of the things I think we need to learn is not to wait until the entire public is shocked by hacking allegations into a dead child‘s voicemail before we actually start asking the questions about where the lies, the deceit and the subterfuge end.

One of the things that we‘ve seen really clearly is that the people most responsible for this tend to get promoted. You‘ve got Les Hinton, who was actually Rebecka Brooks‘ boss at “News of the World,” who led the first investigation into the misdoings there, found, surprisingly, that he thought nothing wrong was going on, and then was elevated to be CEO of Dow Jones, which now runs “Wall Street Journal.”

The tentacles of the Murdoch empire reach deep into the U.S. And, you know, the lies are clearly established on Fox News. You know, the question is whether we‘re going to learn from what the Brits have been through, whether we‘re going to wait that long to raise the questions in our country, and whether the Brits are going to learn from us and make sure that he doesn‘t aggregate more power over there, until we get to the bottom of this.

HAYES: Speaking of aggregating more power, the largest step forward for Murdoch and his empire is acquisition of Sky News, one of the largest networks over in England. And currently they are making a bid to purchase it fully. What do you think this will do? Or what do you think this portends for the possibility of that takeover?

HOGUE: Well, I mean, you have to start back a year ago, when they initially made the bid, which they expected to be rubber stamped by the regulators over there, amid fears that the phone hacking scandal was going to grow, amid concerns about Murdoch ever getting power, amid concern about Fox-ification of their airwaves over there.

The deal has already been delayed for a year at great expense, 2.5 billion dollars already to News Corp shareholders. And then just today, it was announced that even though it was expected to be approved today, it‘s been moved to September, which is a good step, but not enough.

It needs to be referred to the Competition Committee, where the citizens actually have input into whether or not Murdoch should have more control over media there, like he does here.

HAYES: We ran through in the opening a number of scandals that have erupted in various Murdoch holdings. And he always seems to sort of come away from it and come out kind of laughing at it all. Do you think there‘s a corner turned here? What separates this? Why is this different? Are we going to—six months from now, Fox News is going to continue being Fox News and he‘s going to continue building this crazy multinational empire?

HOGUE: Well, I mean, I think a corner has been turned in a couple of different ways. First of all, Rupert Murdoch is 80 years old. All of this is actually setting up his legacy. And this is just a terrible note to go out on. In addition, he set up his son, James Murdoch, to be heir to the throne—would you call it that—who had been promoted not that long ago amidst this scandal, moved to New York, some say because he needed to get out of the way of what everybody knew was going to boil over in terms of rage of the U.K. about the “News of the World” scandal.

And the question is actually whether Murdoch‘s legacy can survive this, and whether his son has a sincere intention to bring “News of the World” and News Corp International into the next century, and actually behave like a corporate citizen that puts public welfare and, quite honestly, shareholder concerns above their personal and political agenda.

HAYES: Finally, I wanted to ask you, a lot of people are now looking at the way the rest of the British media had treated the scandal in the beginning and kind of pooh-poohed it or sort of tacitly sort of winked and nodded at what “News of the World” was doing.

Do you think there‘s an analogue in the way that the mainstream press treats Fox News? And if this could be a kind of wake-up call in that respect?

HOGUE: I mean, it‘s really a great point, Chris, because there is sort of this sense that Fox News just does what it does, and you either believe it or you don‘t. But rarely do we hear the mainstream media actually talk about the systemic deceit, bigotry, and hatred that goes all through that network, where you‘ve got the managing editor in Washington, D.C. tying our president to socialism, even when he admits that it‘s far-fetched.

And this is a pattern of mismanagement at News Corp International that we need to pay attention to in the U.S. right now.

HAYES: Elyse Hogue with Media Matters, thanks so much for joining us tonight . That will do it for us this Thursday edition of THE LAST WORD. From Los Angeles, I‘m Chris Hayes in for Lawrence O‘Donnell.